SPECIAL INSTRUCTIONS 

Special instructions on how to comply with 421-a rent approval and registration requirements for projects that received HPD notices of impending revocation in November 2016 or DOF notices regarding potential suspension of 421-a benefits mailed in December 2016.
Click here to download FAQ  

 New York State Division of Homes and Community Renewal Instructions on Initial         
 Registrations for 421-a Buildings

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 421-A CHANGES

On June 15, 2015, the legislature enacted Chapter 20 of the Laws of 2015, which made the following changes to Real Property Tax Law Section 421-a: 

  • extends the date by which a project must commence construction in order to still qualify under the expired 421-a program (“Existing Program”)  from June 23, 2015 to December 31, 2015;
  • requires any project that commences after June 15, 2015 and on or before December 31, 2015 to be completed on or before December 31, 2019 in order to qualify under the Existing Program;
  • establishes a new 421-a tax exemption program for any project that commences construction between January 1, 2016 and June 15, 2019 and is completed on or before June 15, 2023 (“New Program”), but, as noted below, the New Program is suspended.
  • creates a new option for owners of some projects that are currently receiving 421-a benefits to extend the exemption for 10 to 15 years in return for agreeing to both preserve the existing affordable units and provide additional affordable units during that period (“Extended Benefit Program”).
EXISTING PROGRAM

The new law makes some changes to the Existing Program. One significant change is that for projects that commence construction on or after June 15, 2015, affordable units and market rate units must share the same common entrances and common areas and the affordable units cannot be isolated to a specific floor or area of the building.

HPD has received questions about whether Section 66(n) of Chapter 20 of the Laws of 2015 imposes an application deadline for projects that seek to be grandfathered under the existing 421-a program. It does not. Chapter 20 of the Laws of 2015 contained detailed grandfathering provisions.  See Sections 63-a, 63-b and 63-j of Chapter 20 of the Laws of 2015, amending, respectively, RPTL Sections 421-a(2)(a)(iv)(A), 421-a(2)(c)(ii) and 421-a(6)(b).  Applicants should rely on those grandfathering provisions for purposes of determining continued eligibility under the existing program.

Click here for more information about the existing program

Click here to view Tax Incentives 421a Proposed Rules

NEW PROGRAM

The New Program is suspended until representatives of residential real estate developers and construction labor unions sign a memorandum of understanding regarding wages of construction workers performing work on 421-a projects that contain more than 15 units.

Only one application would be required, it would have to be filed within one year after completion, and construction benefits would be retroactive.

The project would have to comply with the affordability requirements and other requirements for 35 years. 

Market rate rental units would be subject to rent stabilization during any period in which the actual monthly rent charged is below the vacancy decontrol threshold.

Rental Projects

Eligible rental projects would receive:

  • a 100% exemption for a construction period of up to three years; and
  • a 35-year post-construction tax exemption (a 100% exemption during the first 25 years and an exemption equal to the percentage of affordable units during the last 10 years). 

Rental projects would be required to choose one of three affordability options and comply with it for the entire benefit period: 

Option A

  • 25% of the units must be affordable: at least 10% at up to 40% of AMI, 10% at up to 60% of AMI, and 5% at up to 130% of AMI; and
  • the project cannot receive any government subsidies other than tax-exempt bond proceeds and 4% tax credits.

Option B

  • 30% of the units must be affordable: at least 10% at up to 70% of AMI and 20% at up to 130% of AMI. 

Option C

  • at least 30% of the units must be affordable at up to 130% of AMI;
  • the project cannot receive any government subsidies; and
  • the project cannot be located south of 96th Street in Manhattan or in any other area established by local law. 

Homeownership Projects

Eligible homeownership projects would receive:

  • a 100% exemption for a construction period of up to three years; and
  • a 20-year post-construction tax exemption (a 100% exemption during the first 14 years and a 25% exemption during the last 6 years), subject to an assessed valuation cap of $65,000 per dwelling unit. 

Homeownership projects would have to meet the following eligibility requirements:

  • upon the first assessment following completion, the project must have an average assessed value not exceeding $65,000 per unit;
  • each purchaser during the benefit period must agree in writing to maintain the unit as his or her primary residence for at least the first 5 years of ownership; and
  • the project cannot be located in Manhattan or contain more than 35 units. 

EXTENDED BENEFIT PROGRAM

The Extended Benefit Program would only be available to rental projects that began construction prior to July 1, 2008 and qualified for a 20-year or 25-year 421-a tax exemption.

Owners who elect to participate would receive either:

  • an additional 10 years of 50% exemption (for 25-year benefit properties); or
  • an additional 15 years of 50% exemption (for 20-year benefit properties).  

During this extended benefit period, the owner would be required to:

  • rent at least 20% of the units to households whose income does not exceed 100% of AMI (and whose average income does not exceed 80% of AMI); and
  • rent at least 5% of the units to households whose income does not exceed 130% of AMI. 

The first requirement is identical to the existing affordability requirement applicable to such projects (it simply extends that requirement for an additional 10 or 15 years). The second requirement is an increase over and above the existing affordability requirement.